SALE OF AN EMPIRE
While it was once worth over $1 billion (U.S.), Martha Stewart’s company was acquired on Monday for much less,
At its peak, Martha Stewart’s media empire, built around her carefully curated and fussily decorated lifestyle brand, was worth well over $1 billion (U.S.). Yet on Monday, the company agreed to sell itself for a fraction of that.
Martha Stewart Living Omnimedia said that it would sell itself to the Sequential Brands Group, a conglomerate whose brands include Jessica Simpson and the Franklin Mint, for just under $200 million.
It is in some ways a reminder of how far the company has fallen from its heights, when Stewart’s particular vision of a perfectly decorated lifestyle commanded attention and investor dollars.
The company was dealt a blow in 2004 when Stewart — a former stockbroker and model who discovered a lucrative knack for decorating and catering — was convicted of obstructing justice and lying about a well-timed stock sale, spending several months in prison in West Virginia.
Stewart also became ensnared in a three-year court battle with J.C. Penney and Macy’s over the sale of her merchandise.
Despite working under a temporary ban from holding an officer title at a publicly traded company, she eventually reclaimed the title of chairwoman of the company that bears her name. Stewart will now serve as chief creative officer of the brand and take a seat on the board.
But Martha Stewart Living has been battered by the troubles that have afflicted many media companies, as readers shifted to other titles and television shows. Last fall, the company struck a deal to license two of its main magazine titles to the Meredith Corp., providing editorial content for those publications.
In the latest quarter, the company’s publishing revenue fell 70 per cent to $5.7 million, revenue for its merchandising business fell 16 per cent to $10.9 million and revenue in its broadcasting unit fell 46 per cent to $367,000. In 2012, the company discontinued Whole Living and made Everyday Food, a supplementary issue to its flagship Martha Stewart Living.
Martha Stewart Living has reported annual losses every year since 2003 with the exception of 2007. For the past seven years, the company’s annual sales have been on a downward slope, reaching $141.9 million last year, down from $327.9 million in 2007.
Now, the company itself will become a part of Sequential Brands, whose business revolves around buying brands and then licensing them out for a fee.
All told, Sequential Brands expects its portfolio to fetch nearly $3.75 billion in annual sales with the addition of Martha Stewart Living.
“This merger is positioned to further the growth and expansion of the unique Martha home and lifestyle brand,” Stewart, 73, said in a statement. “We now have the opportunity to tap into Sequential’s expertise and resources to expand our merchan- dising business both domestically and abroad.”
Under the terms of the deal, Sequential Brands will pay $6.15 a share, using a mix of cash and stock. That price represents a roughly 20 per cent premium to Martha Stewart Living’s closing price last Wednesday, before The Wall Street Journal reported on the discussions.
But all the same, investors seemed dismayed by the announcement. Shares of the company plunged 86 cents, or 12 per cent, to close at $6.12. That stock drop comes even as Martha Stewart Living was granted a 30day “go-shop” period, in which it can solicit higher takeover offers.
Investors had anticipated a higher price. Through Friday, the shares had jumped 37 per cent over two days amid ongoing reports of the imminent takeover.
The offer price may lead to share- holder resistance, said Erik Gordon, clinical assistant professor at the University of Michigan’s Ross School of Business. After suffering through the worst of times with the company, they expected more from the turnaround efforts under chief executive officer Daniel Dienst.
“It’s a fizzle-out end for what was once a consumer empire,” Gordon said in an email. “Martha was a good entrepreneur who was blind to her weak spots that cost her and her shareholders dearly.”
The Martha Stewart Living brand reaches about 100 million consumers monthly and has a retail presence in stores such as Macy’s, Home Depot and Staples. Under the deal, Sequential will also get the Emeril Lagasse brand, which includes food and cookware products and television and book properties. With files from Star wire services